The FSOC has the power to deem companies or activities as systemic threats to the financial system, a determination that typically imposes tough rules and aggressive monitoring by regulators. Treasury Department and other federal agencies, after weeks of deliberation, are nearing a decision on whether to launch an examination by the Financial Stability Oversight Council (FSOC), according to Bloomberg sources.
officials are discussing the prospect of launching a formal review into whether Tether and other stablecoins threaten financial stability, scrutiny that could lead to dramatically ramped up oversight and mandatory reporting. Part of Tether’s risk to the global financial system was of the system’s own making.īy denying normal banking services and relationships to the stablecoin, Tether was forced to use other means to back up its stablecoin issuances, and that’s created a situation where despite a lack of clear regulatory framework to oversee the entity, it could upset the commercial paper market (the market for short term corporate borrowing) simply by dint of its considerable size. With over US$68 billion in market cap, and coming in around the sixth or seventh largest holder of commercial paper in the U.S., Tether, issuer of the dollar-based stablecoin USDT, is the elephant in the room when it comes to financial markets.Īs the go-to stablecoin for the cryptocurrency markets, Tether has in many ways reached terminal velocity, and attained a size where it has the potential to destabilize financial markets in hitherto inconceivable ways.
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